Nitric oxide is a highly reactive molecule that has been implicated in host defense and tissue injury. In the present studies, we determined whether rat type II alveolar epithelial cells have the capacity to produce this mediator. We found that type II cells synthesize significant quantities of nitric oxide after treatment with the inflammatory cytokines, interferon-gamma (IFN-gamma) and/or interleukin-1 beta (IL-1 beta), or with the combination of IFN-gamma and tumor necrosis factor-alpha. In contrast to rat alveolar macrophages, type II cells were unresponsive to lipopolysaccharide. Production of nitric oxide by type II cells in response to IFN-gamma was dose dependent, reaching a maximum at 100 U/ml, and blocked by NG-monomethyl-L-arginine (L-NMA), a nitric oxide synthase inhibitor. Northern blot analysis demonstrated that nitric oxide production by type II cells was due to expression of mRNA for an inducible form of nitric oxide synthase (iNOS). Following brief exposure of rats to irritant-inducing doses of ozone (2 ppm, 3 h), type II cells were found to produce significantly more nitric oxide than were cells from control animals. This was due to increased expression of iNOS mRNA. Cells from ozone-treated rats were also sensitized to produce more nitric oxide in response to IFN-gamma and IL-1 beta. This was associated with a marked increase in expression of iNOS mRNA and enzyme protein in the cells. We also found that ozone inhalation caused enhanced production of hydrogen peroxide, as well as spontaneous and IFN-gamma-induced cytostasis of type II cells toward P815 mouse mastocytoma cells.(ABSTRACT TRUNCATED AT 250 WORDS)